Commercial Financing and Underwriting Commercial Construction Loans

Suppose a developer wants to build a commercial project, say a large retail center.  The commercial construction lender, typically a bank, is not going to cover 100% of the costs and take all of the risk.  The developer has to have some skin in the game.

In order to get construction financing on a commercial project, the developer is typically required to cover 20% of the total cost of the project.  This contribution often takes the form of equity in the land.  Since the land usually represents around 20% of the value of an improved property, the bank usually wants the developer to contribute the land free and clear of any mortgages.

Many times, however, the developer may have a small mortgage on the land, and the developer's equity may take other forms.  He may have paid for all of the architectural and engineering work out-of-pocket.  His own construction company may have graded the property.  Finally, the developer may be required to simply bring cash into the deal at closing.  For example, Blackburne & Brown recently approved a $2 million construction loan on a condo project.  One of the conditions of this commitment was that the developer had to bring in $250,000 in cash at the closing.

You can apply directly to hundreds of commercial construction lenders on C-Loans.com